December 12, 2021; Expect Better January Effect After More Pronounced Tax Loss Selling Season?

Nearly two-thirds of tech companies that went public via IPO this year are trading below their IPO price, according to data provided by Dealogic. The weak performance is a reflection of both the market, which has turned jittery over the past few months, and the massive increase in the number of companies going public. Of the 132 tech IPOs, 85 are trading below their IPO price as of the close of the market Monday. Looked at another way, the stock prices of newly public tech companies rose an average of 24% a month after their IPO this year, compared to 41% last year. And as time went on, this year’s offerings performed even worse. This lack lustre performance extends to small cap Canadian listed stocks as well, Sophic Capital looked at the performance of tech and tech adjacent, sub $100 million market stocks as of Nov 30th; we found that the median stock is this group is trading ~65% below its 52 week high, which makes this year’s tax loss selling even more pronounced than usual. The jury is still out on whether this will lead to  a better January effect. Against this backdrop, companies continue to execute, last week, EMERGE (ECOM-TSXV) achieved record Gross Merchandise Sales of $10 million in November 2021, exceeding entire reported GMS from Q3 2021. A few weeks ago, Sophic Client Clear Blue Technologies (CBLU-TSXV), provided a bullish outlook, as customer planning for telecom system rollouts and wireless lighting construction planning for 2022 is very active. In the USA, SEC Chair, Gary Gensler signaled tighter SPAC regulations could be coming soon. China is preparing a blacklist of which kinds of tech companies won’t be able to use VIEs to raise foreign capital and sell shares abroad, but it will likely grandfather in companies that have already used the legal structure to bypass rules banning foreign investment.

Magnet Forensics (MAGT-TSX) raises $74.4 million in bought deal secondary offering.

Waterloo-headquartered Magnet Forensics is set to raise $74.4 million in a bought deal secondary offering, selling 2.45 million subordinate voting shares priced at $30.30 each. The agreement was made with a syndicate of underwriters led by Canaccord Genuity Corp. and BMO Capital Markets, in which they are entitled to an over-allotment option. If exercised in full, it would increase the offering’s gross proceeds to $85.6 million. Toronto Stock Exchange (TSX)-listed and launched in 2010, Magnet offers a digital investigation software that acquires, analyzes, reports on, and manages evidence from digital sources, including computers, mobile phones, IoT devices, and cloud services. Magnet claims over 4,000 public and private sector customers in over 90 countries. This capital raise follows Magnet’s filing of its short form base shelf prospectus in October, where it stated that the company is looking to raise $950 million through offerings during the 25-month period that the prospectus is effective. https://bit.ly/31RcCn9

TAAL (TAAL-CSE) announces debt financing.

The company entered into a term loan agreement (the “Loan”) with a private lender (the “Lender”) providing for debt financing in an aggregate principal amount of US$10,000,000. The Lender has made immediately available the full financing under the Loan in an amount equal to US$10,000,000. Borrowings under the Loan are secured by a general security agreement over all the assets of the Company. The security will rank pari passu with any future debt of the Company, from other lenders, up to a maximum US$100,000,000. The Loan matures on December 31, 2024 and bears interest of 8% annually which is payable quarterly at the end of March, June, September, and December of each year. The Loan may be prepaid at any time by the Company, together with all outstanding interest, after December 2, 2022. https://bit.ly/31NJSeQ

Wondr Gaming (WDR-CSE) announces non-brokered financing up to $10,000,000 led by Max Desmarais and the Chrétien-Desmarais family.

The company announced it intends to raise up to $10,000,000 through the issuance of up to 50,000,000 units (the “Units”) at a price of $0.20 per Unit in a non-brokered private placement (the “Private Placement”) financing, led by Max Desmarais and the Chrétien-Desmarais family.  Each Unit will consist of one common share and one-half common share purchase warrant (each whole warrant, a “Warrant”). Each Warrant is exercisable into one additional common share at a price of $0.30 for a period of twenty-four months from the closing date. https://bit.ly/3ykQjlm

Kudos secures $10 million from Canadian Business Growth Fund to boost employee engagement.

Employee engagement platform provider Kudos has secured a $10 million minority equity investment from the Canadian Business Growth Fund (CBGF). Headquartered in Calgary and founded in 2010, Kudos’ technology enables organizations to boost employee engagement using its peer-to-peer recognition software, which quantifies productivity within the company. Employers are able to send recognitions to their workers through Kudos’ rewards-focused programs. According to Kudos, its fresh financing positions the startup for global expansion, as it expects to double its workforce to 120 employees across Canada by the end of 2022. The new capital brings its total funding to $15.8 million. In August, Kudos was among the 15 Alberta-based companies that received $1 million in funding from Western Economic Diversification Canada through the Business Scale-up and Productivity program. The company also reported a successful fourth quarter in sales in 2020, representing over 150 percent growth when compared to any quarter in the previous year. Kudos attributes its expansion to an increase in interest from enterprise and Fortune 500 clients, driven by the global shift towards remote and hybrid work environments. https://bit.ly/3lTVkwf

EMERGE (ECOM-TSXV) achieves record GMS of $10 million in November 2021, exceeding entire reported GMS from Q3 2021, CEO to provide webcast update on December 14.

EMERGE achieved record Gross Merchandise Sales (“GMS”) of approximately $10 million (unaudited), a 236% increase compared to November 2020 GMS for the month of November 2021 exceeded the Company’s reported GMS(1) for the full quarter in Q3 2021. WholesalePet.com, EMERGE’s most recent acquisition, saw double-digit organic growth year over year, strong profitability, and positive cash flow during November 2021. Based on results to date, the Company anticipates Q4 2021 to be its largest quarter yet in terms of GMS, Revenue and Adjusted EBITDA. EMERGE CEO and CFO to host year-end virtual webcast on Tuesday, December 14, at 11:00am ET. Since its go-public listing in December 2020, EMERGE has closed three acquisitions, along with four leading niche e-commerce brands, truLOCAL.ca, BattlBox.com, CarnivoreClub.co and WholesalePet.com. In total, the Company currently owns and operates 8 brands across 5 verticals in North America. https://bit.ly/3yfREtW

Just how much did 2021’s tech IPOs underperform last year’s?

A lot. Nearly two-thirds of tech companies that went public via IPO this year are trading below their IPO price, according to data provided by Dealogic. The weak performance is a reflection of both the market, which has turned jittery over the past few months, and the massive increase in the number of companies going public. A total of 132 technology companies went public via an IPO this year, raising nearly US$86 billion, roughly double last year’s figures in both number of offerings and amount raised, according to an analysis of data provided by Dealogic. If you throw in tech companies going public by merging with a special purpose acquisition company or via direct listing, the number of newly public tech companies is about 257—compared to 101 last year. The result isn’t pretty. Of the 132 tech IPOs, 85 are trading below their IPO price as of the close of the market Monday. Looked at another way, the stock prices of newly public tech companies rose an average of 24% a month after their IPO this year, compared to 41% last year. And as time went on, this year’s offerings performed even worse. Six months after their IPO, tech stocks were up by an average of only 11%, whereas last year that equivalent figure was 55%, an analysis of data from Dealogic shows. (This data doesn’t include SPAC mergers or direct listings.) https://bit.ly/3q7QKw3

SEC Chair signals tighter SPAC regulations could be coming soon.

Securities and Exchange Commission Chair Gary Gensler signaled Thursday that stricter regulation for special purpose acquisition companies to ensure that mergers of SPACs with businesses are treated more like traditional initial public offerings. In a speech during the virtual Healthy Markets Association Conference, Gensler told attendees that he believes investors may not be getting the same protections when investing in SPACs as they do in traditional IPOs and that he is working on proposals with his staff to more strictly regulate such mergers. One area Gensler focused on was SPAC marketing practices, citing slide decks and other materials that are often included once a company announced a merger with a SPAC. Gensler said sponsors “may be priming the market without providing robust disclosures to the public to back up their claims” and that investors could be making decisions based on incomplete information. “Therefore, I’ve asked staff to make recommendations around how to guard against what effectively may be improper conditioning of the SPAC target IPO market,” he said. “This could, for example, include providing more complete information at the time that a SPAC target IPO is announced.” Once uncommon, SPACs exploded in popularity last year with 248 blank-check companies going public, a more than 300% increase from the previous year, according to SPAC Research. The boom continued this year as 583 SPACs went public, more than double last year’s number. The SEC has increased its scrutiny on SPACs before—most notably issuing new guidance on financial disclosures in April, which led to a slowdown in the number of SPACs going public—but Gensler’s proposals would be the toughest regulation SPACs have seen yet. https://bit.ly/3IM65ee

Intel to take Mobileye public next year.

Intel plans to take Mobileye, the advanced driver assistance and automated driving subsidiary it acquired for US$15 billion more than four years ago, public next year. Spinning Mobileye out into a separate publicly traded company could increase value for Intel shareholders, its parent company said in an announcement that went out late Monday. A source told TechCrunch the IPO is expected to take about six months, a timeline that suggests it has not yet started the typical IPO roadshow process. A source familiar with Intel’s plans to list shares of Mobileye told Reuters the unit could be valued at more than US$50 billion. The Wall Street Journal first reported Intel’s intent to sell shares of Mobileye. https://tcrn.ch/3DLsPHd

Chinese AI firm SenseTime mulls delaying Hong Kong IPO.

Chinese artificial intelligence firm SenseTime is considering delaying its Hong Kong initial public offering, as the U.S. government is reportedly planning to add the company to an investment blacklist, Bloomberg reported. SenseTime’s IPO was expected to price Friday, but the company, whose major backers include SoftBank, is now discussing with advisers whether to delay the listing. The situation is complicated by the company’s previous agreement with investors that it would go public by a certain date, according to Bloomberg. The Financial Times and the Wall Street Journal reported this week that the U.S. would place SenseTime, which develops facial recognition software and other tools, on a Treasury Department blacklist of Chinese companies with military ties that Americans are banned from investing in. SenseTime’s customers include Chinese government agencies. https://bit.ly/3dH4tnw

China readies VIE blacklist but will spare companies that are already listed.

China is preparing a blacklist of which kinds of tech companies won’t be able to use VIEs to raise foreign capital and sell shares abroad, but it will likely grandfather in companies that have already used the legal structure to bypass rules banning foreign investment. VIEs, or variable interest entities, have been used for two decades by Chinese companies as a way to circumvent rules against foreign investment. Now, China is looking to more tightly restrict foreign ownership of technology it sees as essential to safeguarding national security and its citizens’ data. Meanwhile, U.S. market regulators are also ramping up their scrutiny of U.S.-listed Chinese companies using VIEs, setting a deadline three years from now for tougher disclosure and auditing. The report did not specify which industries would be blacklisted entirely from using VIEs, but cited people familiar saying it would likely cover sectors that gather up large amounts of data or otherwise impacted national security. Over the weekend, China’s securities regulators denied an earlier report by Bloomberg that they were going to ban all VIEs overseas. https://bit.ly/3yfS8QM

European start ups to raise US$121 billion in 2021.

European tech start ups look set to raise a record US$121 billion in 2021, more than triple the amount of investment from last year, as global VC and private equity firms continue to plow resources into finding early stage companies on the continent. The data comes from the 2021 State of European Tech report, a key annual initiative to chart the European tech ecosystem led by London VC firm Atomico, which was released on Tuesday. Like elsewhere in the world, private valuations of start-ups have surged. Europe’s share of companies worth at least US$1 billion jumped from 223 to 321 over the course of one year. The report showed Europe has a significant portion of global investment for early stage tech companies. According to the data, compiled from Dealroom, European start-ups accounted for 33% of all global capital invested in rounds of US$5 million or less. It comes as Coatue Management, Sequoia Capital and Lightspeed Venture Partners have all made major European-based hires over the last two years. https://bit.ly/3ykQJIs

Kohl’s activist investor urges retailer to spin off e-commerce or sell the company.

Activist investor Engine Capital is calling for Kohl’s to either spin off its online business or sell the company entirely to increase shareholder value. In a public letter to Kohl’s board of directors on Monday, Engine Capital, which has a 1% stake in Kohl’s, said the department store chain’s e-commerce arm could get a US$12.4 billion valuation as a separate company, 59% higher than the $7.8 billion value that the market now puts on Kohl’s entire business. Engine Capital is the latest activist investor to push a mall retailer to separate its online and offline businesses like Sak’s Fifth Avenue has done with Saks.com. In October, Macy’s activist investor Jana Partners urged the retailer to separate its e-commerce store from its physical store chain to get a higher valuation as customers today shop more online than at malls. In November, Macy’s said it hired advisers to assess the value of its digital business, Bloomberg reported. Investors seem keen on the idea of Kohl’s selling the company or spinning off its e-commerce arm. Kohl’s stock is trading up more than 7% following the news. https://bit.ly/3dKVkKE

First Apple AR/VR headset weighs about 350 grams, lighter second-gen model already in development.

Prolific Apple analyst Ming-Chi Kuo is continuing his coverage of the upcoming Apple augmented reality and virtual reality product, with the first-generation headset expected to debut sometime in 2022. The first-generation headset will weigh around 300-400 grams, which compares quite favourably to the existing VR headsets on the market. However, the analyst says Apple is already working on a second-generation design which will be significantly lighter, as well as featuring an updated industrial design, new battery system, and faster processor. Kuo stresses that Apple’s debut in this space will be a mixed reality device, enabling augmented reality and virtual reality experiences in a single headset. Rumors point to the first generation headset being extremely high-end with high-resolution displays for each eye, and M1-chip level performance. It is also expected to be expensive, with prices starting above US$1000. It will definitely be aimed at an ‘early adopter’ market, at least initially. https://bit.ly/3ykS2rd

The NFL is launching fantasy football NFTs in a partnership with DraftKings.

DraftKings and the NFL Players Associate have partnered to launch gamified NFTs, which will be incorporated into DraftKings fantasy football platform. The deal grants DraftKings licensing rights for the name, image, and likeness of active NFL players. The non-fungible tokens will feature varying tiers of rarity and special editions. https://bit.ly/3DKhZBn

Football fans spending millions on club crypto-tokens.

Football clubs have potentially made hundreds of millions of pounds selling controversial crypto “fan tokens”. Analysis commissioned by BBC News estimates more than £262 million (US$350 million) has been spent on the virtual currencies. Some of the tokens are marketed as offering real-world perks to the buyer. But critics say these perks are insignificant – one offered the chance to vote for songs to be played in stadiums – and clubs have insufficient protection for supporters. So far, across the five major European leagues 24 different clubs have launched or are considering fan tokens, including eight Premier League sides. Most offer tokens akin to a club-specific crypto-currency – virtual coins can be bought and sold and their value rise and fall depending on supply and demand. Some clubs, such as Manchester City, also sell digital collectibles known as NFTs (non-fungible tokens). Most of the clubs offering fan tokens have signed up to a company called Socios that organises the initial sale and subsequent trading of the virtual coins – but other platforms, including Binance and Bitci, are growing too. https://bbc.in/3DRra2W

Google, Meta, Amazon—and China—are driving growth in digital ad market.

Digital advertising is growing faster than the world’s largest ad-buying agency expected it to, but the market remains dominated by three tech giants: Google, Meta Platforms (formerly Facebook) and Amazon, according to new estimates released by WPP’s GroupM. China, where digital represents about 90% of ad spending, is also driving this shift. In a new report, the agency said digital advertising will account for 64.4% of total advertising spending in 2021, up from 60.5% last year and 52.1% in 2019. Digital advertising is likely to end 2021 growing by 30.5%, far eclipsing the growth of about 10% the segment saw last year. GroupM expects that growth to revert back starting next year and through 2026. Google-owner Alphabet, Facebook-owner Meta and Amazon account for somewhere between 80%-90% of total global digital ad spending outside of China, according to the report. Inclusive of other forms of advertising including traditional media, these three companies account for more than 50% of total ad spending globally outside of China, up from about 40% in 2019. That doesn’t mean traditional media channels, and in particular, TV, do not remain important for marketers. However, digital is also driving growth in this segment, as more advertisers spend money in ad-supported streaming environments. Connected TV advertising globally will grow to US$16.6 billion this year, up from nearly US$12.9 billion last year, per the forecast. China’s influence on the digital advertising category remains strong. Digital media now accounts for nearly 90% of the Chinese ad market, up from almost 80% prior to the pandemic, the agency said. However, as The Information has previously reported, prices in the Chinese ad market are soaring, which is proving to be a drag on startups seeking to acquire new customers in that region. https://bit.ly/3IFob1f

AWS outage causes package delivery delays.

An Amazon Web Services outage Tuesday highlighted the extent to which the tech giant’s products undergird a sizable chunk of the modern web. The disruption, which primarily impacted AWS’ Virginia-based US-East-1 region, caused service issues for many popular sites and apps, including Instacart, Disney+, Netflix, Venmo, Delta Airlines, Robinhood, NPR and Coinbase, among many others. The outage also caused major issues within Amazon itself. Much of the internet retailer’s delivery infrastructure—including the apps and software used to dispatch delivery drivers and communicate with Amazon Flex couriers—runs on AWS. Motherboard and Bloomberg reported that as of late Tuesday afternoon, many Amazon delivery drivers in the U.S. still could not complete their routes because the app that displays delivery instructions was not working. According to Motherboard, the outage has also caused issues at some Amazon warehouses, which rely on AWS for time tracking and package scanning. https://bit.ly/3DUlTba

Poshmark ventures into digital goods with NFTs launch.

Online secondhand goods firm Poshmark on Monday announced it is launching non-fungible tokens, the company’s first step into the sale of digital assets. Poshmark currently does not accept crypto payments on its marketplace. The launch is taking place through a live auction on blockchain platform Bitski, which houses virtual goods and assets for users and creators. For its initial auction, Poshmark is offering a JPEG image of a spinning Poshmark logo. The company will also issue additional NFTs on December 7 through a giveaway for users who re-share Poshmark’s posts on Instagram and Twitter. The NFTs auction and giveaway are examples of how Poshmark engages with its more than 30 million users. But most of those users don’t buy the goods that are sold on its marketplace, a problem that has had an outsized impact for the firm as its sales growth continues to slow this year. https://bit.ly/33nJ7d3

Alleged Bitcoin inventor trial ends without a real Satoshi standing up.

A jury has ruled that Craig Wright, a man who claims to have invented Bitcoin, won’t have to give up half of his supposed stash of crypto — a stash valued at over US$50 billion. The court case has generated a lot of buzz in the Bitcoin community because he would have had to transfer those Bitcoins if the court had ordered him to, and that’s something only the real Satoshi can do. Eyes were on the trial to see if Wright would be called to absolutely prove he has the Satoshi million. The court case garnered so much attention because, again, much of the Bitcoin community feels absolutely certain that Wright didn’t create the cryptocurrency — and there was the tantalizing possibility that the court might make Wright actually prove that he owned the coins during the trial or that he’d have to cash them (and similarly prove ownership) if he was ordered by the state to pay out half of them to Kleiman’s family.  While the trial was an absolute rollercoaster — the judge more or less called Wright a liar and accused him of trying to use forged documents as evidence — we didn’t get any moments where Wright was asked to prove without a doubt that he was Nakamoto. Wright claims the trial proved he invented Bitcoin, but as Bloomberg writes, the “yearslong litigation in Florida has done little to quiet the skeptics.” According to The Block, the jury wasn’t asked to determine whether Wright was actually Nakamoto. Instead, its job was to determine whether Wright and Kleiman had a business relationship that would entitle the Kleiman estate to any fortune Wright may have made if he actually did invent Bitcoin. Wright still owes US$100 million, in fiat instead of crypto. The story isn’t quite over yet, though — Wright’s been ordered by the jury to pay $100 million to W&K Info Defense Research, a company Wright started with Kleiman (the jury says he breached the LLC’s intellectual property rights). Coming up with US$100 million is no small task, so if we see a stack of Bitcoin (in the neighborhood of 2,000 coins at today’s rates) move from the addresses widely attributed to Nakamoto, it could prove what the courts didn’t. Craig has also reportedly said that he’ll donate most of his Bitcoin fortune to charity now that he’s won. https://bit.ly/3yi8AQt

Ford to triple production capacity for the all-electric Mustang Mach E by 2023.

Ford plans to increase production of the all-electric Mustang Mach E next year with the goal of tripling its current capacity by 2023 to meet “incredible demand,” CEO Jim Farley tweeted late Friday. This is the first time the automaker has provided specific outlook for the Mustang Mach E. Ford said in November that it would increase its production capacity of electric vehicles to 600,000 units globally by 2023 — a goal that would be spread across the Mustang Mach E, F-150 Lightning and commercial E-transit vans. If Ford hits that 600,000 figure it would double the number it had expected to produce over the next two years. https://tcrn.ch/3ERvLn7

Toyota will build a US$1.29 billion electric vehicle battery factory in North Carolina.

Toyota will build a US$1.29 billion battery factory in North Carolina in an effort to bring some of its electric vehicle supply chain to the US. The news comes on the heels of Toyota’s announcement that it will invest around US$13.6 billion in battery tech over the next decade, including a US$9 billion investment in production, as it attempts to electrify its vehicle lineup. Toyota plans on spreading the US$1.29 billion for the new factory over the next decade, but production at the facility is scheduled to begin in 2025, said Chris Reynolds, chief administrative officer for Toyota Motor North America. In the first year, Toyota plans on producing 1.2 million battery packs for its upcoming lineup of electric vehicles, Reynolds said. Toyota has said it will create 1,750 new jobs.  Globally, battery production is expected to grow from 95.3GWh in 2020 to 410.5GWh in 2024, according to GlobalData, a data and analytics company. The news is also set against the backdrop of fierce lobbying in Washington, DC, over the future of the federal EV tax credit, which currently provides shaves $7,500 off the purchase price of some electric vehicles. Congressional Democrats have proposed increasing the credit to US$12,500 for purchases of electric vehicles made in the US by unionized workers, triggering a backlash from non-union companies like Tesla and Toyota. The Japanese automaker has run full-page newspaper ads accusing President Joe Biden and the Democrats of “play[ing] politics with the environment.” https://bit.ly/3GBmal0